Independent advice is experiencing a revival, with a surge in the number of principals applying for their own Australian Financial Services Licence (AFSL).
Reports that non-aligned financial planning firms will struggle under the Future of Financial Advice reforms are greatly exaggerated, according to Soula Cargakis, chief executive of dealer services business at Associated Advisory Practices (AAP).
A provider of dealer services such as compliance, training and technical advice to boutique firms, AAP expects to add at least 33 new member firms over the next 12 months.
The group, which is majority-owned by Centrepoint Alliance, increased its number of new member firms by 12 per cent, or 21 AFSL holders, to 191 in the year to June 30, 2013.
In August, a further nine self-licensed firms joined AAP, and the group is in negotiations with an additional seven licensees, with a strong pipeline of around 26 leads.
Similarly, rival outfit, My Dealer Services, has helped 10 advice businesses gain their own AFSLs in the last six months, pushing the number to 50 in the last four years.
My Dealer Services recently reported a threefold increase in enquires.
Cargakis said a growing number of advisers had left the banks and institutions in the last 18 months, seeking greater flexibility and autonomy by holding their own AFSLs.
“Others are boutique financial planning firms which have held their own AFSL for a while but now want to partner with someone for dealer services, so they can spend more time in front of clients,” she said.
“There is a realisation among businesses which are well organised and well run that FoFA isn’t that difficult to comply with, and small businesses in particular can move quickly to put the right processes and procedures in place.”
Centrepoint Alliance owns 55 per cent of AAP, but announced on June 20 it had entered a merger implementation deed to acquire the remaining 45 per cent of the business from customer licensees.
AAP’s revenues increased by 6 per cent to $5.2 million in the year to June 30, 2013, driven by the licensee recruitment and favourable market conditions leading to a boost in assets under advice and administration.
However, the group recorded a drop in pre-tax profit to $2.7 million, compared to $3.1 million in 2012. The reduction was due to costs associated with the implementation of the new FoFA rules and the merger transaction with Centrepoint Alliance.
I agree that independent advisers can flourish post FoFA, however, it would be interesting to know how many practices are absorbing the additional costs and how many are passing them onto clients.
Given that AAP’s revenues increased by 6 per cent to $5.2 million, “driven by the licensee recruitment and favourable market conditions leading to a boost in assets under advice and administration”, what will AAP’s revenues look like post-FoFA when it’s likely that true independents will not be charging asset based fees?
The big will get bigger, the small (with limited resources) will just fade away and die.
The weak will give in to the big and lead a frustrated life.
The strong will put themselves in a position where they sit on the same side of the table as their clients. They will be attract smart clients who value what we do. They will live a fulfilling life.
All depends on how much you believe in the value we add and how you communicate that to clients.